Brazilian Real Advances on Bank of America Government Bailout

By Adriana Brasileiro

Jan. 16 (Bloomberg) -- Brazil’s real rose after a $138 billion bailout for Bank of America Corp. raised speculation that government measures will preserve corporate profitability and help revive the credit market.

Bank of America today received an emergency package from the government to support its acquisition of Merrill Lynch & Co. and to prevent the global financial crisis from deepening. U.S. stock-index futures rose.

“This kind of news is positive for market sentiment and increases appetite for risk,” said Reginaldo Galhardo, currency trading manager at Treviso Corretora de Cambio in Sao Paulo.

The real gained for a second day, advancing 1.1 percent to 2.3279 per U.S. dollar at 7:15 a.m. New York time, from 2.3543 yesterday.

Yields on rate futures contracts fell after retail sales in Brazil increased at the slowest pace in 28 months, fueling calls for an interest-rate cut next week as growth in Latin America’s biggest economy slows.

Sales rose 5.1 percent in November, compared with a revised 9.8 percent gain in October, the national statistics agency IBGE said today in Rio de Janeiro. The increase was less than the 6 percent median forecast in a Bloomberg survey of 25 economists.

The yield on Brazil’s overnight futures contract for July fell eight basis points, or 0.08 percentage point, to 12.09 percent.

Central bankers will lower the benchmark overnight lending rate 75 basis points to 13 percent at their Jan. 21 policy meeting, according to the median estimate in a Bloomberg survey of 13 economists.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net